A Little Perspective on the Housing Bubble
IF A STOCK YOU OWNED, during the middle of the night, doubled in price due to some unusual temporary credit [...]
June 1 2008 by Chief Executive
IF A STOCK YOU OWNED, during the middle of the night, doubled in price due to some unusual temporary credit arrangement and then fell by the morning to the same price before you went to sleep, have you lost money? Most people who slept through it all would neither be a winner or loser. What is striking about the current subprime mortgage crisis that is affecting the financial and housing industries is the constant harping about the losses. Yet for many people who have owned their homes through this cycle and paid their mortgages, no money has been lost. The banks that financed these homes have made money.
Keep in mind that home ownership, despite the crisis in housing for most Americans, has reached an all-time high of 69 percent. This is comparable to
Clearly, however, during that long night we refer to as the housing bubble there were sellers and buyers who lost and won. During that night bankers made money by issuing loans. Developers and builders who sold their inventories made money and lots of it. Some fortunate homeowners sold their homes without buying in again and made money. It’s true that those who kept their money in the game during that long night of easy credit and got left holding the bag are feeling pain. But this really depends whether they sold high and bought high. Where you start counting determines everything.
With this in mind we would argue that the economy is experiencing less pain than the media or grasping politicians eager to impose their pet fix would have us believe.
There were clearly winners and losers during the long night f the bubble. But for most of us who slept through it, neither buying nor selling a home, we are, if not unscathed, ready for the next growth opportunities and possibly a little richer than when we went to sleep.
Thank the Politicians for High Energy Prices
With gas north of $4 at the pump our solons in